Home Suppliers, Inc.

This project will give you an opportunity to evaluate financial statements and to make decisions based on the information presented in the financial statements of Home Suppliers, Inc.

Introduction

Home Suppliers, Inc. sells a variety of consumer products. Its comparative income statement and balance sheet for the years $2022$ and $2021$ are presented on the Req $1$ tabs$.$ The Retained Earnings balance on January $1,2021,$ was $$188,442.$ Also, Preferred Stockholder cash dividends of $$5,000$ were paid each year, as was $$50,000$ in dividends paid to Common Stockholders each year.

Required:

$1.$ Prepare a horizontal and a vertical analysis of the comparative income statement and balance sheet.

$2.$ Calculate the following ratios for each year:

The rate of return on net sales.

The rate of return on common stockholders$$ equity. Preferred dividends are $$5,000$ for both years. $($Remember that dividend requirements on preferred stock must be deducted from net income after taxes to obtain income available to common stockholders.$)$

The earnings per share of common stock, assuming that the preferred stock is nonparticipating, noncumulative, and has no liquidation value. The number of outstanding shares of common stock remained constant at $100,000$ throughout all of $2021$ and $2022.$

The price$-$earnings ratio on common stock. The market values were $$4\mathrm{.}00$ in $2021$ and $$3\mathrm{.}00$ in $2022.$

The rate of return on total assets.

The ratio of stockholders$$ equity to total liabilities.

The current ratio.

The acid$-$test ratio.

The merchandise inventory turnover. Inventory was $$75,000$ at January $1,2021.$

The accounts receivable turnover. Credit sales were $$1,400,000$ for $2022$ and $$1,300,000$ for $2021.$ The beginning accounts receivable balance for $2021$ was $$123,500.$Home Suppliers, Inc.

This project will give you an opportunity to evaluate financial statements and to make decisions based on the information presented in

the financial statements of Home Suppliers, Inc.

Introduction

Home Suppliers, Inc. sells a variety of consumer products. Its comparative income statement and balance sheet for the years $2022$

and $2021$ are presented on the Req $1$ tabs$.$ The Retained Earnings balance on January $1,2021,$ was $$188,442.$ Also, Preferred

Stockholder cash dividends of $$5,000$ were paid each year, as was $$50,000$ in dividends paid to Common Stockholders each year.

Required:

Prepare a horizontal and a vertical analysis of the comparative income statement and balance sheet.

Calculate the following ratios for each year:

a$.$ The rate of return on net sales.

b$.$ The rate of return on common stockholders' equity. Preferred dividends are $$5,000$ for both years. $($Remember that dividend

requirements on preferred stock must be deducted from net income after taxes to obtain income available to common

stockholders.$)$

c$.$ The earnings per share of common stock, assuming that the preferred stock is nonparticipating, noncumulative, and has no

liquidation value. The number of outstanding shares of common stock remained constant at $100,000$ throughout all of $2021$ and

d$.$ The price$-$earnings ratio on common stock. The market values were $$4\mathrm{.}00$ in $2021$ and $$3\mathrm{.}00$ in $2022.$

e$.$ The rate of return on total assets.

f$.$ The ratio of stockholders' equity to total liabilities.

g$.$ The current ratio.

h$.$ The acid$-$test ratio.

i$.$ The merchandise inventory turnover. Inventory was $$75,000$ at January $1,2021.$

j$.$ The accounts receivable turnover. Credit sales were $$1,400,000$ for $2022$ and $$1,300,000$ for $2021.$ The beginning accounts

receivable balance for $2021$ was $$123,500.$